An Introduction to Accounting: Accountability in Organisations and Society

Half title page
Title page
Imprint page
Brief contents
Contents
Guide to the text
Guide to the online resources
Preface
About the author
Acknowledgements
Module 1: Organisations, responsibilities, accountability and accounting
	Chapter 1: What is accounting?
		Introduction
		What does ‘accounting’ mean?
			Informed decisions
			Performance
			Stakeholders
			The role of accounting
		The relationship between accounting and accountability
			What do we mean by accountability?
		Internal and external accounts
		Who produces these accounts?
			The accounting function
		Qualitative characteristics of accounting information
			Relevance
			Reliability
			Comparability
			Verifiability
			Understandability
			Timeliness
		An accountability model
			Why is an organisation collecting and disclosing particular information?
			To whom is the account information being directed?
			What information needs to be reported?
			How should the information be disclosed?
			Real-world examples of our accountability model
			The influence of organisational objectives on accounting
		The changing role of accountants
			The drivers of change in accounting
		Accounting as both a technical and social practice
		Study tools
	Chapter 2: Organisations and their reporting boundaries
		Introduction
		What is the reporting boundary?
			The reporting boundary in the context of financial reporting
			The reporting boundary beyond an organisation
			Sustainability reporting
		The resources of an organisation
			Accounting for non-financial resources
		What constitutes a cost?
			Which costs could be recognised?
		The inputs and outputs of an organisation
			Deciding what to measure
		The influence of accounting frameworks on reporting
		Supply chain considerations
			Life cycle considerations
		Accounting: not a one-size-fits-all practice
		A brief introduction to management accounting
			Information used by management can also form the basis of public reports
		Some frameworks used to produce accounts for external stakeholders
			External reporting – financial
			External reporting – social
			External reporting – environmental
		For-profit and not-for-profit organisations
		Some general forms of organisations
			Sole traders
			Partnerships
			Companies
		Study tools
Module 2: Accounting and its role in managerial decision making
	Chapter 3: An introduction to management accounting
		Introduction
		The role of management accounting
			Why produce management accounts?
			To whom are management accounts directed?
			What information is generated?
			How is management accounting information disclosed?
		What does management do?
			Planning
			Implementing action
			Monitoring and evaluating
			Learning, revising and adjusting
		Short-term and long-term planning: a balanced approach
			Balancing planned long-term outcomes with short-term performance
		Planning for sustainable development
			The need for sustainability
		Planning to create value
			Porter’s five primary activities of organisations
			Porter’s four supporting activities for organisations
			Value chain analysis
			Make or buy?
		The behaviour of costs
			Relevant costs
			Variable costs
			Fixed costs
			Mixed costs
		The contribution margin
			Using the contribution margin to determine the break-even point
			The margin of safety
			Operating gearing
			Generating a target financial profit
		Consideration of non-financial variable and fixed costs
		Maximising the return on a constraining or scarce factor
		Consideration of special orders
		Adding value through critical thinking and application of professional skills
			Skills that accountants require
		Study tools
	Chapter 4: Budgeting as a means of organisational planning and control
		Introduction
		An overview of budgeting
			What are budgets?
			Why are budgets prepared?
			Who are budgets for?
			How are budgets prepared?
		Who needs to do budgeting?
		The benefits of budgeting
			Using budgets sensibly
		The master budget
			The sales budget
			The production budget
			The direct materials budget
			The direct labour budget
			The manufacturing overhead expenses budget
			The selling and administrative overhead expenses budget
			The cash budget
			The budgeted income statement
			The budgeted balance sheet
		Budget variances
			Identifying and investigating budget variances
		Static and flexible budgets
			Static budgets
			Flexible budgets
		Budgeting for non-financial aspects of performance
		Behavioural implications of budgeting
			The potential for negative outcomes
		Study tools
	Chapter 5: Performance measurement and evaluation – further considerations
		Introduction
		Life cycle analysis
			Understanding the impacts of products and services
			Assessing and reporting product and service impacts
			Informing stakeholder decisions
			Examples of life cycle analysis
		Life cycle costing
			A real-world example of life cycle costing
		Material flow cost accounting
			The MFCA process
			The benefits of MFCA
			Real-world examples of MFCA
		A focus on waste
		The Balanced Scorecard
			The financial perspective
			The customer perspective
			The internal business perspective
			The learning and growth perspective
			Summarising the BSC framework
			The BSC and management remuneration
		Capital investment decisions
			Payback period
			Accounting rate of return
			Net present value
			Internal rate of return
		Study tools
Module 3: Accountability for social and environmental performance
	Chapter 6: The external reporting of social and environmental information
		Introduction
		Social and environmental accountability
			Why report social and environmental information?
			To whom to report social and environmental information?
			What social and environmental information should be reported?
			How should social and environmental information be reported?
		Corporate social responsibility reporting
			Defining corporate social responsibility
			Social reporting
			Environmental reporting
			Sustainability reporting
		The incidence of CSR reporting
		CSR and sustainability reporting frameworks
			The Global Reporting Initiative
			The International Integrated Reporting Committee
			The Sustainability Accounting Standards Board
			The CEO Guide to Climate-related Financial Disclosures
			The Global Compact
			Other frameworks
		CSR and sustainability-related measurement frameworks
			The Greenhouse Gas Protocol
		Corporate responsibilities: The cause of climate change
			The Carbon Disclosure Project
		Counter (shadow) accounts
			Counter accounts incorporated within organisational reporting
			Separate counter accounts
		Independent review of CSR reports
		Study tools
Module 4: Accountability for financial performance
	Chapter 7: An introduction to financial accounting
		Introduction
		Applying the accountability model to financial accounting
			Why disclose financial accounting information?
			To whom are the financial disclosures directed?
			What types of disclosures are made?
			How are disclosures made?
		The separation of ownership from management, and the resulting need for regulation
		What is the objective of financial reporting?
			General purpose financial statements (GPFSs)
			Special purpose financial statements (SPFSs)
		The historical nature of financial reports
		Key financial accounting principles and terms
			Entity concept
			Accounting period convention
			Monetary unit convention
			Going concern assumption
			Accrual basis of accounting
		Sources of accounting standards
			IASB standards
			FASB standards
			The enforcement of accounting standards
		The role of the Conceptual Framework for Financial Reporting
		Qualitative characteristics of financial accounting information
			Fundamental qualitative characteristics
			Enhancing characteristics
			Overview of the qualitative characteristics
			Costs versus benefits
		The elements of financial accounting
			Assets
			Liabilities
			Owners’ equity
			Income
			Expenses
		What is profit?
		The accounting equation
			The double-entry effect of transactions
			Expanding our accounting equation to incorporate specific
changes in equity
			The need for separate accounts
		Preparing simple financial statements
		Study tools
	Chapter 8: Recording transactions in journals and ledgers – more detail on the financial accounting process
		Introduction
		The role of source documents
		Recording transactions within the journal
			Use of debits and credits within the journal
		Posting entries from the journal to the ledger
		Preparing a trial balance
		Adjusting journal entries
			Income earned but not received
			Expenses incurred but not yet paid
			Income received in advance
			Prepayments
			Depreciation
		Closing entries
		Real-world refinements to the accounting information system
			Multiple journals
			Subsidiary ledgers
		A comprehensive example of recording transactions
			Solution
		Study tools
	Chapter 9: The balance sheet
		Introduction
		Overview of the balance sheet
			Why prepare a balance sheet?
			An overview of some of the steps necessary to generate
a financial statement
		The definitions of assets, liabilities and equity
		Recognising assets
			Relevance
			Faithful representation
		Measuring assets
			Cash
			Accounts receivable
			Inventory
			Prepayments
			Property, plant and equipment
			Marketable securities
			Intangible assets
			Leased assets
			Summary of asset measurement rules
		The recoverable amount of an asset
		Presenting assets in the balance sheet
		Recognising liabilities
			Relevance
			Faithful representation
			Contingent liabilities
		Measuring liabilities
			Bank overdrafts
			Accounts payable
			Provisions
			Corporate bonds
		Presenting liabilities in the balance sheet
		Recognising and measuring equity
		Presenting equity in the balance sheet
			Share capital
			Retained earnings
			Reserves
		Further reflections on the balance sheet
		Study tools
	Chapter 10: The income statement and the statement of changes in equity
		Introduction
		Overview of the income statement
			Presentation of the income statement
			The accountability model and the income statement
			The income statement and the news media
		The use of accounting numbers in contractual arrangements negotiated
by an organisation
		Definitions of income and expenses
			Potential focus on short-term performance
			Focus of not-for-profit organisations
			The subdivision of income into revenues and gains
		Recognising income and expenses
			Income recognition and the requirement that control of the good
or service has passed to the customer
			Long-term construction contracts
			Long-term service contracts
			Revenue recognition policy notes
			Summary of income and expense recognition
		Measuring income and expenses
			Measuring income when the receipt of cash has been deferred
beyond 12 months
			Measuring income when the asset being received is not cash
			Measuring the cost of sales
			Income tax expense
		Accounting rules change over time
		Presenting income and expenses in the income statement
			Disclosing exceptional or unusual items
			Profit or loss derived from discontinued operations
			Other comprehensive income
			Statement of comprehensive income
		The statement of changes in equity
		Is profit a ‘good’ measure of an organisation’s performance?
		Study tools
	Chapter 11: The statement of cash flows, and cash controls
		Introduction
		Overview of the statement of cash flows
			The relationship between cash flows and profits and losses
			The accountability model and the statement of cash flows
		Understanding cash, and cash equivalents
		The difference between cash flows and accounting profits
			Changes in accounts receivable
			Changes in accounts payable and inventory
			Changes in accrued expenses
			Changes in prepaid expenses (prepayments)
			Changes in revenue received in advance
			Changes in provisions
			Depreciation and impairment losses
		The reduced risk of managerial manipulation
		Presenting the statement of cash flows
			Operating activities
			Investing activities
			Financing activities
			Supporting information for the statement of cash flows
		Preparing the statement of cash flows
		Cash controls
			Cash receipts
			Cash payments
			Bank reconciliations
			Petty cash funds
		Study tools
Module 5: Tools for reviewing an organisation's publicly available reports
	Chapter 12: The analysis of organisations’ external reports
		Introduction
		The role of financial statement analysis
			Who performs financial statement analysis?
			Why undertake financial statement analysis?
		An overview of how financial statement analysis can be performed
			Horizontal and vertical analysis
			Additional information
		Using accounting ratios
			Profitability ratios
			Operating efficiency ratios
			Financial gearing (or stability) ratios
			Liquidity ratios
			Investment-based ratios
		Important information also resides in the notes to the financial statements
			Accounting policies
			Significant events occurring after the end of the accounting period
			Contingent liabilities
			Remuneration policies
		Information about accounting-based contractual agreements
		Further reflections on assets
		Analysing social and environmental (sustainability) reports
			Why has the CSR report been prepared?
			The organisational context
			A summary of some issues to consider when evaluating the ‘quality’
of a social and environmental report
		Independent auditing of information in reports
		Concluding comments
		Study tools
Glossary
Index